Angel Broking, the fourth largest stock broking firm in the country in terms of active clients, outlined its IPO plans on Friday. The Rs 600 crore public issue will open for subscription on September 22 and has been priced in the Rs 305-306 per share band.
Incidentally, two other public issues, Computer Age Management Services, India’s largest registrar and mutual funds transfer agent, and Chemcon Specialty Chemicals will also open for subscription next week.
Up until July, there had only been two IPOs in 2020. But, suddenly there seems to be a flurry of new issues hitting the market. The Rs 702 crore IPO of IT services provider Happiest Minds Technologies got a huge response from investors; the issue subscribed 151 times and investors who were lucky to get an allotment, saw their share valuation double on listing day itself. Earlier in July, Rossari Biotech also had a bumper debut, with the shares closing 75 per cent higher on listing day. Mindspace Real Estate Investment Trust also listed at a premium in August.
The IPO of Route Mobile, a cloud communications service provider, also got good response from investors; the issue was subscribed 73.30 times, with the non-institutional investors portion getting subscribed 193 times. The issue is likely to list on the exchanges next week.
Angel Broking’s initial public offer includes a Rs 300 crore offer for sale from some of the existing investors and a fresh issue of Rs 300 crore. On the other hand, Computer Age Management Services (CAMS) is looking to raise Rs 2,242 crore at the upper end of the Rs 1,229-1,230 a share band. Through this IPO, NSE Investments, a unit of National Stock Exchange, is selling its entire 37.5 per cent stake in the company and there is no fresh issue here.
Chemcon Specialty Chemicals, meanwhile, is looking to raise Rs 318 crore from tie public offer, which includes a fresh issue of Rs 165 crore. Both CAMS and Chemcon IPOs will open for subscription on Monday.
Several other companies are lining their public issues. According to primary market tracker Prime Database, there are at least 31 companies who have got regulatory nod for IPOs. These include Barbeque Nation Hospitality, Burger King India, Easy Trip Planners, Equitas Small Finance Bank, Mazgaon Dock Shipbuilders, National Commodity and Derivatives Exchange and UTI Asset Management among others.
LIC could also join that list later this year. The government had in the Budget announced plans to sell a part of its holding in the country’s largest life insurance company, via an IPO. Given the share size of the company, this could well be among the largest IPOs in India ever.
Geojit Financial Services expects as much as Rs 51,515 crore will be raised by companies through IPOs this year.
But, why are so many companies looking to go public at a time India’s economy is likely facing its worst recession this year due to the COVID-19 pandemic?
“In 2019, IPO offerings tumbled to a four year low—Rs 12,600 crore raised by 16 companies—due to economic slowdown and elevated global trade tensions. However, a trend reversal is happening with the benchmark indices witnessing a sharp run up in recent months led by improved market sentiments on the back of a gradual opening up of the economy since June,” said Vinod Nair, head of research at Geojit.
Lav Chaturvedi, CEO of Reliance Securities, points to three factors that have played a key role in the revival of the primary market.
“There is clearly a pent up demand because things have been slow for so long. There is a global liquidity, there is a risk on (environment) and that also plays a role whenever there are streams of IPO that come. The timings of IPOs are usually aligned to liquidity. Thirdly, companies, not just through IPOs but other mechanisms too, are raising money to deal with uncertainty, to ensure business model evolves and becomes stronger. It also gives exit to some of the investors who have been there for a long time,” he said.
Equity markets crashed in March as investors were concerned over the fast spreading COVID-19 pandemic. But, since then markets have rallied around the world driven by huge liquidity pumped into the system by global central banks and governments. Retail investors, too, have taken to buying stocks in a big way. The BSE Sensex closed at 38,845.82 level on Friday, up almost 52 per cent since the low of 25,638.90 it hit on March 24 this year.
“A number of companies that had received regulatory approvals postponed their IPOs, waiting for a recovery in the equity markets. Now, with the sharp turnaround in the secondary markets and broader market also participating in the rally, the primary market is also reviving once again. Promoters are rushing to the primary market to make most of the opportunity,” said Hemang Jani, head – equity strategy, broking and distribution at Motilal Oswal Financial Services.
The success of IPOs like Happiest Minds and Rossari Biotech will give a further boost to investor confidence and will help attract more companies to the capital markets, say analysts.
“The recent IPOs so far were good offers that came after a long time. With rising interest in midcaps and smallcaps, investors were on the look out for new ideas to invest in and these IPOs provided them the same,” said Jani.
